The behavioural approach to decision making under uncertainty combines insights from psychology and sociology into economic decision making. It steps away from the normative homo economicus and introduces a positive approach to human decision making under uncertainty. We provide an overview of...

We find that investor sentiment should affect a firm's employment policy in a world with moral hazard and noise traders. Consistent with the model's predictions, we show that higher sentiment among US investors leads to: (1) higher employment growth worldwide; (2) lower labor productivity, as the...

Disagreement is used as a measure of both investor heterogeneity and uncertainty. We study whether disagreement captures heterogeneity or uncertainty for the foreign exchange market. We do so by relating disagreement to alternative measures of uncertainty, as well as by taking advantage of the...

We estimate a generic agent-based model in which agents have heterogeneous beliefs about the future price to see to what extent behaviour differs across assets, and what this implies for market stability. We find evidence for behavioural heterogeneity for all asset classes, except for equities....

Mandelbrot and the Smile It is a well-documented empirical fact that index option prices systematically differ from Black-Scholes prices. However, previous research provides inconclusive results whether the observed volatility smile could be explained by a discretetime dynamic model of stock...

The record-breaking prices observed in the art market over the last three years raise the question of whether we are experiencing a speculative bubble. Given the difficulty to determine the fundamental value of artworks, we apply a right-tailed unit root test with forward recursive regressions...

We identify crucial events during the European sovereign debt crisis and investigate their impact on the euro currency. In particular, we analyse how specific announcements related to vulnerable Eurozone member states, European Central Bank (ECB) actions, and credit rating downgrades affect the...

This paper sets the background for the Special Issue of the Journal of Empirical Finance on the European Sovereign Debt Crisis. It identifies the channel through which risks in the financial industry leaked into the public sector. It discusses the role of the bank rescues in igniting the...

We examine the impact of board cultural diversity, based on directors' ancestry, on firm performance conditional on product market competition. We argue that culturally diverse boards foster critical thinking and offer creative solutions that help firms thrive in competitive environments. We...

This paper documents that speed is crucially important for high frequency trading strategies based on U.S. macroeconomic news releases. Using order level data of the highly liquid S&P500 ETF traded on NASDAQ from January 6, 2009, to December 12, 2011, we find that a delay of 300 milliseconds (1...